The Peterborough Examiner Local News - Friday, July 20, 2007

By KRISTINE OWRAM/Canadian Press

PORT HOPE - Uranium producer Cameco Corp. has suspended operations at its Port Hope processing plant after uranium and chemicals were found in soil at the facility - the third piece of bad news for the Saskatoon-based company in less than two weeks.

On July 11, Cameco, which is the world's biggest uranium producer, announced that it will take more time than expected to stop a flood at its new Cigar Lake project and then pump out the water. This will delay the planned production startup of the northern Saskatchewan uranium mine until 2011 instead of late

Then, on Thursday, Cameco reported that Toronto-based subsidiary Centerra Gold Inc. has lowered its 2007 gold production estimates for the Kumtor mine in the former Soviet republic of Kyrgyzstan by one-third of the previous level.

Friday's announcement, that the Port Hope processing plant will be temporarily shut down while cleanup and testing is done at the site, adds another degree of uncertainty for Cameco shareholders.

There is a risk Cameco's reputation will be affected by this "series of unfortunate events," BMO Nesbitt Burns analyst Victor Lazarovici said in an interview with BNN, a business-oriented cable channel.

There's also a danger the investigation and subsequent cleanup could cost Cameco more than expected, Lazarovici added.

"Once you start investigating an environmental or other natural condition, it's a little bit like taking the walls out of your house for renovation," he said. "You never know what's behind there and how expensive their remediation work is going to be, so costs tend to rise."

But Lazarovici said he doesn't expect the fallout from Friday's discovery to be too harsh. It actually should produce almost no hit to earnings. There probably will be some additional costs associated with the investigation and any remediation of the plant ... but relative to a company the size of Cameco these are probably not material at this stage," he said.

The contamination was discovered during an excavation at a building for the installation of new equipment. The chemicals are in a contained area and public health and worker safety are not affected, the company said Friday.

The plant, which handles a chemical form of uranium used during its enrichment process, will be shut down for at least two months. Cameco said no layoffs are planned at the conversion facility and it will try to find new assignments for its 420 employees.

Further investigation to determine the source of the chemicals and the area affected is ongoing, said Cameco spokesman Lyle Krahn.

"What we're doing is we're drilling holes from inside of the building now to determine a more precise area of where the chemicals are, and once we do that, hopefully we'll get a better idea of all the chemicals that are involved and where the sources of the chemicals might be," said Krahn.

Cameco will not have a sense of how much the work is going to cost it until more information becomes available, he added.

"I think you deal with the situations as they arise. Certainly we have a lot of other operations and facilities that are producing and doing well," said Krahn. "We've discovered this information, we'll deal with it, we'll put our best expertise to it and we'll find our way through it."

Since the perimeter of the plant is about 70 metres from the edge of the property and the ground water flows at an average of 40 to 60 metres a year, Cameco feels it has ample time to contain and mitigate the affected area, the company said in a statement.

Samples taken in April from wells in the area were not contaminated, and the company has arranged for additional samples to be taken.

Uranium dioxide conversion and other activities at the site are not affected.

Cameco will provide a revised production forecast in its second quarter report.

Shares in the company closed down 43 cents at $49.32 on Friday at the Toronto Stock Exchange before the announcement.

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